Can a Trustee Remove a Beneficiary From a Trust in Ontario?

One of the most common questions about trusts in Ontario is whether a trustee can remove a beneficiary. The answer depends on the terms of the trust and the type of trust involved. This article explains the general principles and when courts may intervene.

The General Rule: Trustees Cannot Remove Beneficiaries

As a general rule, trustees in Ontario cannot remove beneficiaries from a trust unless the trust document explicitly gives them that power. Beneficiaries have rights that are protected by law, and trustees must act in accordance with the terms of the trust and their fiduciary duties.

What the Trust Document Says Matters

The starting point is always the trust document itself. The trust document (whether it’s a will creating a testamentary trust or a separate trust agreement creating an inter vivos trust) sets out:

Who the beneficiaries are
What powers the trustee has
How the trust should be administered

If the trust document doesn’t give the trustee the power to remove beneficiaries, the trustee generally cannot do so.

Types of Trusts and Removal Powers

Discretionary Trusts

In a discretionary trust, the trustee has discretion about when and how to distribute trust assets to beneficiaries. However, having discretion about distributions is different from having the power to remove beneficiaries entirely.

Even in discretionary trusts, trustees typically cannot remove beneficiaries unless the trust document explicitly allows it.

Revocable Trusts

If a trust is revocable (meaning it can be revoked or amended), the person who created the trust (the settlor) may be able to remove beneficiaries, but this depends on:

Whether the trust document allows revocation or amendment
Whether the settlor is still alive and has capacity
The terms of any revocation or amendment provisions

Irrevocable Trusts

If a trust is irrevocable, it generally cannot be changed, which means beneficiaries typically cannot be removed unless:

The trust document explicitly allows it
All beneficiaries consent (in some circumstances)
A court orders it

When Courts May Intervene

Courts in Ontario have the power to vary trusts in certain circumstances, but this is exceptional and requires strong justification. Courts may consider varying a trust (including potentially removing beneficiaries) if:

If all beneficiaries are adults with capacity and they all consent to a change, a court may approve the variation. However, this is not automatic, and the court must be satisfied that the variation is appropriate.

The Trust’s Purpose Cannot Be Fulfilled

If the trust’s purpose can no longer be fulfilled (for example, if a beneficiary has died and there are no alternate beneficiaries), a court may need to intervene to determine what should happen.

There Has Been a Fundamental Change in Circumstances

In rare cases, if there has been a fundamental change in circumstances that makes the trust unworkable or contrary to its original purpose, a court may consider varying it.

The Variation is in the Best Interests of Beneficiaries

Courts may approve variations that are clearly in the best interests of beneficiaries, but this is a high threshold.

Common Misconceptions

“The Trustee Has Discretion, So They Can Remove Beneficiaries”

Having discretion about distributions does not mean the trustee can remove beneficiaries. These are different powers.

“If I’m the Settlor, I Can Always Remove Beneficiaries”

If you created the trust, whether you can remove beneficiaries depends on whether the trust is revocable and what the trust document says. Many trusts become irrevocable once created.

“Trustees Can Do Whatever They Want”

Trustees have significant responsibilities and must act in accordance with:

The terms of the trust
Their fiduciary duties
Applicable law

They cannot simply remove beneficiaries because they want to.

What Trustees Can Do

While trustees generally cannot remove beneficiaries, they may have other powers, such as:

Discretionary Distributions

In discretionary trusts, trustees can decide when and how much to distribute to beneficiaries, which can effectively limit a beneficiary’s access to trust assets without removing them entirely.

Exercising Powers of Appointment

If the trust document gives the trustee a power of appointment, the trustee may be able to add beneficiaries or change how assets are distributed, but this depends on the specific power granted.

Seeking Court Directions

If there’s uncertainty about the trustee’s powers or how the trust should be administered, the trustee can seek directions from the court.

Practical Considerations

Review the Trust Document

If you’re a trustee wondering about your powers, or a beneficiary concerned about your rights, the first step is to carefully review the trust document.

Consider the Trust’s Purpose

Understanding the trust’s purpose can help determine whether a proposed change (like removing a beneficiary) would be consistent with that purpose.

Get Legal Advice

Trust law is complex, and the consequences of acting incorrectly can be significant. If you’re considering removing a beneficiary or are concerned about being removed, get legal advice.

Consider Alternatives

Instead of removing a beneficiary, there may be alternatives, such as:

Exercising discretion to limit distributions
Seeking a court order to vary the trust
Negotiating with beneficiaries

Key Takeaways

Trustees generally cannot remove beneficiaries unless the trust document explicitly allows it
The type of trust (revocable vs. irrevocable, discretionary vs. fixed) affects what changes are possible
Courts can intervene in exceptional circumstances, but this is rare
Beneficiaries have protected rights that cannot be arbitrarily removed
Understanding the trust document is crucial for both trustees and beneficiaries

This article is for informational purposes only and does not constitute legal advice. Every situation is unique, and the information here may not apply to your specific circumstances. For advice tailored to your situation, consult with a qualified legal professional licensed to practice law in Ontario.